Shares of Northern Empire Resources (TSX-V:NM, OTC:PSPGF) have been whacked hard due to the recent gold correction; gold is down about 6% from its peak of $1369.70 on April 11th, meanwhile Northern Empire is down nearly 30% over the same time frame. The sell-off in NM really accelerated on Tuesday when the gold price dropped below the key psychological $1300 level for the first time in 2018. This breakdown in the gold price caused several market commentators to issue sell warnings on gold mining shares, with at least one notable newsletter writer telling his followers to sell, among many other gold juniors, shares of Northern Empire.
While a drop below a round number in the gold price causes the herd to panic out of the highest quality gold mining shares, shrewd investors might begin smelling opportunity:
Buying high quality stocks that are in long term uptrends during shorter term market corrections is one of the tried and true ways to make money in the market. We generally want to be buyers of pullbacks that come close to a rising 200-day simple moving average, within the context of a healthy long term chart structure.
The NM chart is a virtually picture perfect example of a BUY setup during a correction within the context of a strong long term uptrend. The Force Index is characteristic of a stock that is oversold and the price/volume profile of the last few days is indicative of sellers becoming less aggressive (or perhaps running out of shares to sell).
I will be a buyer into any further weakness during the next couple of days. For those who would like to trade this NM setup tactically I believe one can place a stop loss just below the C$1.00 level and target a rally back up to the C$1.40-C$1.60 area area during the next couple of months (a trade that offers better than 2 to 1 reward vs. risk).
I laid out the uniquely bullish fundamental story in Northern Empire back in March and the story has only gotten better during the last couple of months. Investors should expect more drill results from the Sterling Mine within the next couple of weeks followed by a steady flow of drill results from the Crown Block of projects during the rest of the summer.
The article is for informational purposes only and is neither a solicitation for the purchase of securities nor an offer of securities. Readers of the article are expressly cautioned to seek the advice of a registered investment advisor and other professional advisors, as applicable, regarding the appropriateness of investing in any securities or any investment strategies, including those discussed above. Northern Empire Resources is a high-risk venture stock and not suitable for most investors. Consult Northern Empire Resources’ SEDAR profile for important risk disclosures.
EnergyandGold has been compensated to cover Northern Empire Resources and so some information may be biased. EnergyandGold.com, EnergyandGold Publishing LTD, its writers and principals are not registered investment advisors and advice you to do your own due diligence with a licensed investment advisor prior to making any investment decisions.
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